Affordable Care Act Tax on High Cost Health Plans

As of January 1, 2018, employer-provided health plans from some high-cost health plans (called ‘Cadillac’ plans) will be subject to a 40% excise tax. This tax on health insurance issuers and self-insured plan administrators will be on the amounts by which the cost of coverage exceeds $10,200 on an individual in a month or exceeds $27,500 on a family in a month. These limits will be adjusted for age and gender, increasing for retirees and for employees in high-risk jobs such as installation of electrical or telecomm lines. The limits after 2018 are to be indexed for inflation in following years. The cost of coverage is calculated by rules similar to those used to determine COBRA costs.

One of the most interesting things about the Cadillac Tax Plan is that it is expected that almost one-half of large employers in the US are expected to fall under this category. A recent survey revealed, of employers with 5000 or more employees, 48% of those surveyed expect to have to pay the excise tax in 2018. By 2023, that figure is anticipated to reach over 80% of large employers.

Between 2018 and 2023, Congress anticipates the collection from the Cadillac tax will be about $79 billion. Some employers may charge the tax back to plan participants.

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